PEDAL TO THE METAL

The company that gobbled up Uber in China is now investing in bike-sharing

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What’s China’s number one ride-hailing company to do now that it’s devoured its competitor? The answer might be—start pedaling.

Didi Chuxing, once a rival to Uber before it purchased the latter’s China operation, has invested “tens of millions” of dollars into Ofo, a startup that lets consumers share bikes. The deal shows Didi’s continued expansion of its services beyond mere ride-hailing, and also marks its first investment in a fast-growing, competitive sector.

For now, only university students in 20 metro areas in mainland China can use Ofo. Through a smartphone app, users log in with their student ID and enter the code of a nearby bike. They then receive a code to remove the bike’s lock. The app determines pricing through a combination of distance, time, and demand, and users pay fares through WeChat Payments, the mobile wallet pegged to China’s most popular chat app.

Ofo differs from Uber and Didi’s flagship ride-hailing services in several key ways. For one thing, while those companies don’t generally offer their own cars, Ofo’s fleet consists of a mixture of bikes owned by the company, and ones added to its supply voluntarily by users (the company won’t reveal specific percentages, but most of its marketing materials advertise its in-house yellow bikes). This means the company will incur costs for maintaining the bikes.

Extracting payments is also more challenging. Ofo relies on the GPS of a rider’s phone to calculate fares. But under the right circumstances, if riders turn off their GPS after hopping on the seat, they could trick the system and pay less than they should.

According to Li Zekun, marketing director at Ofo, Didi will help Ofo expand beyond university campuses. The two companies will share data, and eventually help ordinary consumers using Didi’s app to also ride Ofo bikes found in the city, though it isn’t yet clear what will replace student IDs.

Didi has already launched services that go beyond standard car-sharing. In July 2015 it offered a designated driver service, allowing car owners to order a personal chauffeur in the event they’re unable to drive their own vehicle. It also launched a bus service, allowing consumers to hop aboard shuttles that ride along a set path.

Bike-sharing in China, however, is already widespread and competitive. Ofo has a Chinese rival in the form of Mobike, a venture capital-backed startup whose service is available to ordinary consumers across China. It will also compete against countless government-funded bike-sharing programs—some 80% of the world’s top urban bike-sharing schemes are in Chinese cities.

Ofo didn’t break out specific numbers, but it’s safe to assume that bike-sharing will never be as large a market as ride-sharing. Bikes are relatively cheap for individuals to own, and margins on rides are surely thin. But Didi’s move into the market shows the company is trying to cover all modes of transportation—no matter how basic.

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